What To Sell: 3 Sell-Rated Dividend Stocks AGNC, TLM, IVR

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer

TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates.

While plenty of high-yield opportunities exist, investors must always consider the safety of their dividend and the total return potential of their investment. It is not uncommon for a struggling company to suspend high-yielding dividends which could subsequently result in precipitous share price declines.

TheStreet Ratings' stock rating model views dividends favorably, but not so much that other factors are disregarded. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e. how much one is willing to risk in order to earn profits?; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to its stock's performance.

These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. As always, stock ratings should not be treated as gospel — rather, use them as a starting point for your own research.

The following pages contain our analysis of 3 stocks with substantial yields, that ultimately, we have rated "Sell."

American Capital Agency

Dividend Yield: 12.20%

American Capital Agency (NASDAQ: AGNC) shares currently have a dividend yield of 12.20%.

American Capital Agency Corp. operates as a real estate investment trust (REIT) in the United States.

The average volume for American Capital Agency has been 3,064,000 shares per day over the past 30 days. American Capital Agency has a market cap of $7.6 billion and is part of the real estate industry. Shares are down 1.1% year-to-date as of the close of trading on Monday.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

TheStreet Ratings rates American Capital Agency as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 222.0% when compared to the same quarter one year ago, falling from -$100.00 million to -$322.00 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, AMERICAN CAPITAL AGENCY CORP's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to $328.00 million or 67.74% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • In its most recent trading session, AGNC has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • AMERICAN CAPITAL AGENCY CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, AMERICAN CAPITAL AGENCY CORP swung to a loss, reporting -$0.73 versus $3.17 in the prior year. This year, the market expects an improvement in earnings ($2.65 versus -$0.73).

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

Talisman Energy

Dividend Yield: 5.70%

Talisman Energy (NYSE: TLM) shares currently have a dividend yield of 5.70%.

Talisman Energy Inc., an upstream oil and gas company, engages in the exploration, development, production, transportation, and marketing of crude oil, natural gas, and natural gas liquids.

The average volume for Talisman Energy has been 9,318,000 shares per day over the past 30 days. Talisman Energy has a market cap of $8.2 billion and is part of the energy industry. Shares are up 0.8% year-to-date as of the close of trading on Monday.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

TheStreet Ratings rates Talisman Energy as a sell. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed against the S&P 500 and did not exceed that of the Oil, Gas & Consumable Fuels industry. The net income has significantly decreased by 58.2% when compared to the same quarter one year ago, falling from -$1,005.00 million to -$1,590.00 million.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 27.04%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 57.14% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Oil, Gas & Consumable Fuels industry and the overall market, TALISMAN ENERGY INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for TALISMAN ENERGY INC is rather high; currently it is at 54.08%. Regardless of TLM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TLM's net profit margin of -158.36% significantly underperformed when compared to the industry average.
  • TALISMAN ENERGY INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has not demonstrated a clear trend in earnings over the past 2 years, making it difficult to accurately predict earnings for the coming year. During the past fiscal year, TALISMAN ENERGY INC continued to lose money by earning -$0.97 versus -$1.21 in the prior year.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

Invesco Mortgage Capital

Dividend Yield: 11.40%

Invesco Mortgage Capital (NYSE: IVR) shares currently have a dividend yield of 11.40%.

Invesco Mortgage Capital Inc., a real estate investment trust, focuses on investing in, financing, and managing residential and commercial mortgage-backed securities and mortgage loans. It invests in residential mortgage-backed securities for which a U.S.

The average volume for Invesco Mortgage Capital has been 1,088,300 shares per day over the past 30 days. Invesco Mortgage Capital has a market cap of $1.9 billion and is part of the real estate industry. Shares are up 1.8% year-to-date as of the close of trading on Monday.

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

TheStreet Ratings rates Invesco Mortgage Capital as a sell. The company's weaknesses can be seen in multiple areas, such as its disappointing return on equity, weak operating cash flow and generally disappointing historical performance in the stock itself.

Highlights from the ratings report include:
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, INVESCO MORTGAGE CAPITAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has declined marginally to $101.40 million or 7.10% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, IVR has underperformed the S&P 500 Index, declining 6.31% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Real Estate Investment Trusts (REITs) industry average, but is greater than that of the S&P 500. The net income increased by 12.7% when compared to the same quarter one year prior, going from -$80.67 million to -$70.42 million.
  • INVESCO MORTGAGE CAPITAL INC' earnings per share from the most recent quarter came in slightly below the year earlier quarter. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, INVESCO MORTGAGE CAPITAL INC swung to a loss, reporting -$1.75 versus $0.90 in the prior year. This year, the market expects an improvement in earnings ($1.90 versus -$1.75).

EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he thinks could be potential winners. Click here to see his holdings for 14-days FREE.

Other helpful dividend tools from TheStreet:

null

More from Markets

Did Netflix Earnings Just Stomp Out Any Chance of a Big Market Rally?

Did Netflix Earnings Just Stomp Out Any Chance of a Big Market Rally?

Russia Risk: What You Need to Know About the New 'Reset'

Russia Risk: What You Need to Know About the New 'Reset'

Why Netflix Stock Is Still a Buy: Shark Tank Star Kevin O'Leary

Why Netflix Stock Is Still a Buy: Shark Tank Star Kevin O'Leary

Netflix Tanks After Weak Subscriber Growth in 'Strong but not Stellar' Q2

Netflix Tanks After Weak Subscriber Growth in 'Strong but not Stellar' Q2

Here's How Shark Tank Star Kevin O'Leary Decides What Stocks to Invest In

Here's How Shark Tank Star Kevin O'Leary Decides What Stocks to Invest In